Wednesday, May 26, 2010

Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

$15,000 saved. $60,000 in student loan at 6.8%. OR put $15,000 toward $140,000 house which would make interest rate drop from 6.5% to 6.0%? Suggestions please!



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

Go with the mortgage. The interest rate on your loans is higher, but you'll be paying them off in a matter of years. With your mortgage you're paying interest for much longer on a much larger balance, so you want that rate to be as low as possible. It'll save you more in the long run.



Also, if you put 10% down then it won't take you long at all to accumulate 20% equity in your home--which means you can stop paying PMI each month (you'll be paying $50-$150 a month extra on your mortgage until you have 20% equity). Monthly payments will be slightly lower if you put money down and get a smaller loan.



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

Typically you want to pay down / pay off debt as soon as possible. The Mortgage in this circumstance is your best bet. Your home will appreciate in value by at least 4% per year on the $140,000 current appraisal. This means that you are earning a minimum of $5600 per year on that investment. There are additional tax advantages which you will recieve and you can apply your larger tax refund to the principal on your student loans each year. And if you are looking at a 30 year fixed mortgage, you will save tons over the long run by reducing your interest rate half a percent.



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

put it towards the house. it will be an investment.



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

Do the math. What are your monthly payments in each case? The people you are buying your mortgage from will tell you your monthly payments. Do the one that is cheaper. Not a difficult question to answer!



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

your house



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

Before I could begin to answer this, there are several factors to consider. For one, what is your income and what is your monthly budget like? I ask this because you are about to go $200,000 in debt and I'm assuming you are right out of college. That is a fairly large amount of debt for anyone to hold. Is it better to owe one versus the other, let me provide an alternative observation....just something to think about.



Let's assume you can rent somewhere and keep your payments about the same as what your mortgage payment would have been. If you don't already have an emergency fund, you need to take part of your 15,000 and save it in a simple savings account. Then put what's left toward the student loan debt.



Pay this loan off as quick as you can, while taking on no other new debt. Once this is done, you should be able to save your normal student loan payments along with what you were paying extra, and then place it in a simple savings account until you have a sizeable down payment on a home.



The general rule of thumb used by those who know how to control their finances instead of their finances controlling them is to have a mortgage that is no longer than a 15 year note, a fixed interest rate, and the payment should be no more than 25% of your monthly net pay. If you can do those things, then you are well on your way to financial success, if you can't, then you need to wait a little longer.



I do wish you well!



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

Put it towards your mortgage, not only will it drop your interest rate it will also drop your monthly payment since you will be financing $15000 less



Is it better to... put $15,000 saved toward student loans or down payment on mortgage?

I would say down payment on mortgage

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